Once thought to be merely a means of packaging DNA, chromatin has proved to play an active and dynamic role in transcription through the covalent modification of histones. Acetylation is the best-characterized modification, and it has been shown that acetylation/deacetylation have antagonistic roles in gene expression. Other covalent modifications, such as phosphorylation, methylation, and ubiquitylation, are also proving to be important in regulation. In this proposal, we investigate the role of histone ubiquitylation/deubiquitylation in transcription. We have found that ubiquitylation of histone H2B is required for the optimal expression of GALl1and SUC2, both of which require the SAGA and Swi/Snf co-activators. We have shown that the putative ubiquitin-specific hydrolase Ubp8 is a stable component of the SAGA and related SALSA complex and that deletion of the UBP8 gene results in increased ubiquitylated H2B (Ub-H2B) levels but a loss of GAL1 expression. These findings suggest that ubiquitylation/deubiquitylation are fundamentally different than acetylation/deacetylation. In this study, we propose to investigate the role of Ubp8 in co-activator dependent transcriptional regulation by testing substrate specificity in vitro and in vivo. We will then study which co-activator-dependent genes require ubiquitylation/deubiquitylation, the presence of Ub-H2B at the promoters of activated genes with an emphasis on the role of Ubp8, and lastly, the requirement of ubiquitylation/deubiquitylation in transcription factor recruitment to activated genes.